Travel and expenses are two vital parts of any modern business. But how do organisations identify what are acceptable business expenses or vice versa? Or how do companies manage those expenses to always have an accurate and informative report? Here’s where official travel and expense policies come into play.
Tracking employee spending can be tricky and overwhelming without a well-thought-out and strict policy. Approving expenses and allowing any team member to decide how much to spend on their business needs can lead to too high expenses that could put the company at risk.
Managing travel and business expenses requires more effective company leadership, which can develop a standard set of rules and regulations for all employee spending. The guidelines allow leadership to define what are proper expenses while also helping employees travelling for business to easily follow company protocol.
We created this guide to explain why travel and expense management is crucial for modern companies while also sharing common challenges that come with it. Here you will also see the list of steps you need to build a strong and effective T&E policy.
What is Travel and Expense Management?
Travel and expense (also known as T&E) management means documenting and processing business expenses to get a clear picture of resources and for tax deduction purposes.
Since business expenses are tax deductible in most countries, organisations either pay reduced or no tax on them. And all those purchases should relate to business operations to be eligible for a legal tax deduction.
Common business travel expenses are:
- Accommodation: apartments or hotels;
- Transportation: tickets for a subway, plane, train, bus, car and gas fees;
- Entertainment: shows, events and restaurants;
- Per diems: food, accommodation and mileage;
- Health-related: insurance and ERs visits.
Why T&E Management Can be Challenging
As you can expect, expense reporting and reconciliation are usually tedious and take time for both employees and finance management teams. The lack of a clear expense process and rules makes it hard or impossible to track all the paperwork as a business grows.
Let’s explore the most common pain points in companies having ineffective or outdated T&E processes:
Limited Access to Funds
Many companies are still relying on one corporate card, which is used by all teams. While some shared cars are hard to track down and can be easily lost, there are still some good options on the market.
Security Risk
Most payment methods companies use don’t attribute payments to a unique purchaser, making it challenging to identify fraudulent spending when expenses aren’t traceable. And this makes organisations vulnerable to a vast range of financial risks any time payment methods are used.
No Spend Visibility
Finance teams with low spending visibility often struggle with healthy budgeting and balancing cash flow. This makes it difficult to scale company growth. Effective finance teams should always be aware of what company funds are being spent on and why.
Slow Reimbursements
The manual expense tracking and reporting process is usually done through time-consuming back-and-forth email chains. As a result, reimbursements can take weeks and months to be done if it wasn’t lost in the chain at some point. While these outdated processes waste vital time, they also lead to inaccurate reports.
6 Keys to Better T&E Management
Even though every business is unique, there are some common challenges when developing a T&E management system.
Determining how to manage your employee spending best depends on your company’s structure and culture. Alongside a solid T&E policy, implementing an expense management platform can streamline the process, making it easier to track, approve, and analyze expenses in real time. Using such a platform, combined with best practices, has been shown to make any travel and expense process more effective and efficient – regardless of what industry you work in.
Use a Travel Expense Policy Template
It isn’t a fun or engaging thing to write down company policies. That is why templates are always the best and easier to use, reducing the load on your employees and preventing common mistakes.
Do not Make It Boring
Most people will agree that reading documents is extremely boring. And even if your employee reads them, they won’t remember vital points. That is why it is recommended to make your T&E policy simple and easy to skim. This involves adding funny jargon and avoiding long rambling paragraphs. Formatting also plays a great role in the overall understanding.
Apply Fair Spending Rules
Even though it is a common fact, some organisations forget about it and make spending rules different for departments. Your policy will be available for the entire company, so you won’t be able to keep a secret that top management has more allowance and money to spend. Therefore, make sure all your employees have similar rights when it comes to travelling and expenses.
Reduce the number of T&E Management Tools
Most companies use a vast range of tools for finance managers. However, this only makes the process longer and harder. For example, consider brex divvy as the two most popular SaaS tools for modern organisations. Do not waste time jumping between redundant dashboards and applications to complete a single task.
Go with a Paperless Policy
Considering the fact of remote work, most companies’ policies should be written and available online instead of using paper. In addition, you can integrate your T&E policy into the travel and expense management tools. That will make it easier for employees to learn the rules and spend money confidently without reassuring rules every time.
Update Your T&E Policy Regularly
All businesses grow and evolve. That is why travel and expense behaviour can change. At some point, you will notice that your previous policy can’t be used thanks to increased prices or the need for more business trips to expensive countries. That is why your expense policy has to be always adapted to the latest changes in your business operation and stay relevant in the long run. So do not forget to review the policy once a year and bring necessary changes when they are required.
